You just got your paycheck, so now what? You’d think you just need to pay bills that are nearly due and it’ll all be good. You then spend the rest of your money on a shopping spree or treat friends on night outs because, well you think to yourself you deserve it. Of course, you do. Problem is, you end up with what’s little left from the splurge, which most of the time is no longer enough to cover your expenses until the next payday. That dominoes to overdue rentals or utilities, missed payments, and worst, having to borrow just to make ends meet. Thing is, this happens because you’re just merely spending, equating money to expenses, but then you can change that to the better habit of budgeting.
While there’s nothing wrong with spending what you rightfully earned, you don’t want to add to the growing statistics of people struggling with financial woes. Especially in this pandemic that has affected almost all industries causing a lot of companies to scale down or ultimately close shop leaving many losing their main source of income.
You’ve earned your keep, sure, but how do you make it a habit of balancing between the money you earn or how much your income is versus your expenses or how much you can spend for your needs and wants?
With a budget, you are able to create a plan for your money, ensuring that you will always have enough funds for the things you need and the things that are important to you. Your budget will also help with managing debt and work your way out of it. Learn how to reduce debt and take control of your finances.
Without a spending plan, you’ll just get into the vicious cycle of earning and spending, and the danger of getting deep in debt when your bills get past due. But when you budget you help create financial stability. By monitoring your expenses and following a plan, a budget makes it easier to clear your bills, setting aside an emergency fund, and start saving for major expenses such as buying your first car or building your own house. Overall, your budgeting will set you on a stronger financial footing not just for the daily expenses but for your bigger plans for the future.
You might have heard or read about the 50-30-20 budgeting rule already. It’s an easy budgeting method that can help you to manage your money effectively, simply and sustainably. The basic rule of thumb is to divide your monthly after-tax income or your take-home pay into three spending categories: 50% for needs, 30% for wants and 20% for savings or paying off debt.
With the 50-30-20 rule, you allocate funds into three separate buckets. Mandatory expenses or bills and payables that can’t be missed will take 50% of your income. This makes up your mortgage or rental payments, food, and utilities. The 30% you allot to things you want to buy such as dining out, shopping, and leisure activities. The 20% of your paycheck goes to savings in the form of bank deposits, emergency fund, health insurance, education plans, etc. This simple rule helps you determine which are your needs and your wants and how to allot funds for the things that are most important to you.
Now make sure you write down your budget in a notebook or keep it on a note on your mobile phone. Start using it and keep your finances on track. You can start with a monthly budget and then stretch it quarterly, and then yearly. This allows you to forecast the periods with which your finances may be tight and which ones you’ll have extra money. This provides you the opportunity to look for ways to balance the highs and lows in your finances and make sure it remains manageable.
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